The RBI is awaiting a clear fix on the intensity, spread and duration of COVID-19 to project India's GDP growth, the report said. The risks to growth are tilted largely to the downside, the report said, adding that private consumption, in particular, was at serious risk from the COVID-19 pandemic. Most sectors of the Indian economy, apart from agriculture, would be adversely impacted by the pandemic, it said.

There could be relatively modest upsides from monetary and fiscal policy measures and the early containment of COVID-19, if that occurs, the report said, adding that such uncertainties make the forecasting of inflation and growth highly challenging. Aggregate demand is expected to be impacted adversely by likely recession in the global economy, caused by disruptions in global supply chains and lockdowns in many economies, it said.

Citing recent forecasts by the International Monetary Fund, the report said global growth in 2020 could be lower by 300 basis points or more from 2019 because of the pandemic. Lower global output and demand could impact the Indian economy through a variety of channels like merchandise trade and volatility in global financial market, it said. Using the quarterly projection model, the report said global factors could reduce India's growth by 80-180 bps, depending on the severity of the global slowdown. "COVID-19, the accompanying lockdowns and the expected contraction in global output in 2020 weigh heavily on the growth outlook. The actual outturn would depend upon the speed with which the outbreak is contained and economic activity returns to normalcy," it said. Prior to the outbreak of COVID-19, the outlook for growth for 2020-21 was looking up because of a bumper rabi harvest, improving transmission of past reductions in repo rate, and cut in goods and services tax and corporate tax rate, the report said. "The COVID-19 pandemic has drastically altered this outlook," it said.

In February, the RBI had projected the Indian economy to grow 6.0% in 2020-21 (Apr-Mar). The sharp reduction in international crude oil prices, if sustained, could improve India's terms of trade, but the gain from it is unlikely to offset the drag from the shutdown and loss of external demand, the report said. India, which has so far reported 5,734 confirmed COVID-19 cases, is currently on a 21-day nationwide lockdown to curb the rapid spread of the virus in the country. Following the lockdowns, most private think tanks have drastically cut their forecasts on India's GDP growth. Goldman Sachs on Wednesday more than halved its GDP growth forecast for India for 2020-21 to 1.6% from 3.3%.

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